IBD Editorials

Fiscal Cliff's Dirty Secret: It's Not About Taxes At All, But Too Much Spending

There's a lot of talk right now about an impending fiscal cliff. But we already went over a cliff economically in this country a long time ago.

The current debate over tax hikes is an empty one built upon a false premise. The debate is whether raising tax rates will address our current crisis. The premise is that it is a lack of taxation that has led to the crisis. Both are hopelessly wrong.

President Obama's proposed tax increases on the top 2% of earners would fund the federal government for about eight days. Even if we taxed Americans earning over $1 million on 100% of their income, we would raise only about $600 billion in revenue.

Taxing citizens at this level is a tyranny even Europe hasn't reached, and still it would only address about one-third of our deficit.

If one actually does the math, "taxing the rich" turns out to be no real solution at all, only fantasyland rhetoric.

Every dollar the government takes is another dollar used unproductively. Every dollar removed from the private sector and wasted in the hands of bureaucrats is a dollar that will not be used to purchase goods, to pay for services or to meet a payroll.

Every dollar the government ever takes — today, tomorrow and forever — is an attack on jobs and the economy.

Instead of sitting around trying to think of new ways to vote away someone else's money, Washington leaders should finally begin to address the real crisis that has threatened us long before the current handwringing: spending.

With a $16 trillion national debt and well over $1 trillion annually in deficits, we barreled over the edge of fiscal insolvency long before this month.

Why do we lurch from deadline to deadline with no apparent action on our nation's problems until the next deadline approaches? I presented Social Security and Medicare reform to the Senate over a year ago. I directly spoke to the president and vice president about my plan. And their response? Absolutely nothing!

Is it any wonder people are fed up with their government? The president announces we have no time for spending reforms, but when the deadline passes I predict not one committee will step into the breach to begin the process of reform.

Why? Because Democratic leadership still insists that Social Security and Medicare are just fine. Meanwhile, Social Security actuaries tell us that Social Security this year will spend $165 billion more than it receives. Medicare will spend $3 for every $1 it collects. Yet, the president says he doesn't have time for entitlement reform.

The "fiscal cliff" scenario has come and gone. The only question now is: How do we recover?

The only solution is to cut spending. It's no secret to anyone, except perhaps Washington leaders, that our current levels of spending are not only unsustainable, but the main culprit in our fiscal crisis.

Opponents of spending reductions — whether Democrats who insist on maintaining and expanding current domestic spending, or Republicans who insist on maintaining and expanding current Pentagon spending — make the case that any cuts to their preferred parts of government would be "Draconian" or "devastating."

Like tax hikes, this too is a false narrative. According to the Congressional Budget Office, nominal spending in 2008 was $2.5 trillion. The outlays for the 2013 budget are an estimated $3.5 trillion.

This means the federal government plans on spending $1 trillion more next year than it did four years ago. By any measure, this is a significant and dramatic growth in spending.

Estimated revenue for 2013 is $2.9 trillion if the Bush tax cuts expire. Our 2012 revenues were $2.4 trillion, which included the Bush tax cuts. The Bush tax cuts would only make a difference of $500 billion this year — about one third of our entire deficit — but would also further harm our economy due to the job market decline that always accompanies any rise in taxes. History has proved this point time and again.

But if we spent only at 2008 levels combined with the revenues of 2012, next year we would have a deficit as small as $89 billion. An $89 billion deficit would represent less than 1% of GDP. The 2012 deficit was as high as 7.3% of GDP.

Did anyone think the size of government we had in 2008 was somehow not enough government? This is how drastically spending has increased in just the last four years.

Those who argue we can't cut spending are basically saying that our federal government was far too small when Barack Obama entered the White House and that now we can survive only if government continues to spend at its current level. I know few if any Americans who honestly believe this, Republican or Democrat.

It's also hard to imagine reasonable people actually believing that our government spending this obscene amount of money is somehow what makes our economy tick.

A real plan would extend the tax rates we've had for 12 years, reform entitlements and examine any and every way to significantly cut spending. Right now, House GOP leadership seems to want Republicans to be the party that raises taxes just a little less than the Democrats. This will not do.

Republicans are supposed to be the party of limited government and low taxes. These are our most core and basic principles. I don't think it's time to change who we are or what we stand for. It will not help our economy. It will also defeat the purpose of even having a Republican Party.